EasyJet 2008 Annual Report Download - page 37

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easyJet plc
Annual report and accounts 2008
This report sets out the Company’s policy on Directors’ remuneration and details of remuneration paid to Directors in the financial year to 30 September
2008. The report has been prepared in accordance with the requirements of schedule 7A to the Companies Act 1985. Those sections of the report
that have been subject to audit are identified below.
Membership and responsibilities of the Remuneration Committee
Membership and responsibilities of the Remuneration Committee are disclosed in the Corporate Governance report above.
The Committee continues to use Hewitt New Bridge Street (“HNBS”) whom the Committee originally appointed as remuneration advisers. Apart
from advice regarding the design, establishment and operation of remuneration arrangements, HNBS provides no other services to the Company.
Policy
easyJet’s remuneration policy is to reward the Company’s executives competitively against the comparative market place, in order to ensure that they are
properly motivated to perform in the best interests of the Company and its shareholders. The Committee also oversees any significant changes to easyJet’s
employee remuneration structure and sets Directors’ remuneration in this context. The Company aims to provide competitive “total pay” for “on target”
performance, with superior rewards for exceptional performance.
The remuneration packages of the Executive Directors comprise a combination of basic salary, annual bonus, participation in share-based long-term
incentive plans, and “lean” benefits provision. easyJet has a “no frills” approach and does not include, for example, company cars or final salary pensions
as part of the package. Therefore, performance related elements form a significant proportion of the packages of the Executive Directors.
Reflecting best practice, the Committee regularly reviews the structure of its incentive arrangements and, in particular, the balance between short and
long-term incentives in light of the circumstances prevailing each year.
Taking account of the Company’s focus on variable remuneration, an extensive shareholder consultation was undertaken prior to the 2008 AGM to increase
the maximum long-term incentive opportunity. Following shareholder approval at the AGM, the maximum award limit applying to awards made under
the easyJet Long Term Incentive Plan (the “LTIP”) was increased from 100% of salary to 200% of salary.
In light of the current economic environment (including tougher credit conditions, movements in exchange rates and the volatility of oil prices), the
Company is currently revisiting its incentive policy. Should the conclusion of this review result in any proposed material changes being recommended,
it is anticipated that consultation with major shareholders would take place prior to the changes being implemented.
The remuneration policy that will apply in the financial year ending 30 September 2009 is summarised below:
Element Purpose Delivery Detailed policy
Basic salary • Reflect the value of the individual • Reviewed annually, effective • Cash
and their role 1 October • Paid monthly
• Reflects skills and experience • Agreed when previous results • Pensionable
are finalised
• Benchmarked against similar sized
companies and industry comparators
• Targeted at or around median
• Considers individual contribution
Annual bonus • Incentivise year-on-year delivery of • Major measure is profit before tax • Paid as cash
short-term performance goals aligned to long-term targets • Not pensionable
• Other measures based on:
– Customers
– Cash
– Cost
– Operational excellence
Long Term • Aligned to Business Plan • Subject to stretching return on • Annual grant of performance
Incentive Plan • Incentivise long-term growth in equity targets shares
easyJet’s return on equity • Subject to 175% of salary • Opportunity to defer bonus
shareholding requirement and get future matching
share awards
Pension • Provide minimum retirement benefits • Defined contribution • Monthly contribution of 7%
• Opportunity for Executive to • HMRC approved salary sacrifice of basic salary
contribute to their retirement arrangement • Salary sacrifice
The Board as a whole determines the remuneration of the Company’s Non Executive Directors, with Non Executive Directors exempting themselves
from discussions and voting as appropriate. When determining the remuneration of Non Executive Directors, account is taken of practice adopted in
other similar organisations and the time commitment of each Non Executive Director.
Report on Directors’
remuneration
35
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